Financial Modeling and
Forward Financial Analysis
Central Asia Regional Electricity Market
(CAREM)
Workshop and Kick-off MeetingAlmaty – Kazakhstan
November 5-6, 2019
Armen Arzumanyan
Pedro Robiou
Artur Davtyan
Zarko Arsov
OVERVIEW OF THE PROGRAM
• County goals regarding the energy sector
➢ Energy security
➢ Supply reliability
➢ Lowest cost of power for consumers
➢ Maintenance of appropriate technical standards
➢ Regular and adequate investment in the sector
• USAID Central Asia Regional Electricity Market (CAREM)
➢ Launched in 2018
➢ Promotes the region’s
➢ Long-term energy security
➢ Promote Economic growth
• Platform for Central Asia-South Asia regional power market
2
▪ Brief Overview of CAREM
▪ Introduction of the different Tasks
➢ Methodology
➢ Data Gathering
➢ Preliminary Assessment
➢ Development of Financial Models
▪ Objectives of the Activity
➢ Bankable Financial Models (Generation, Transmission, Distribution)
➢ Power Sector Financial Sustainability (Cost-recovery Tariffs)
➢ Capacity Building
▪ Bilateral meetings between CAREM and each country.
➢ Discuss country specific needs and potential solutions.
➢ Address any questions and concerns
KICK-OFF ACTIVITIES
3
METHODOLOGY
4
METHODOLOGY: REQUIRED REVENUES VS
GENERATION & DELIVERY COSTS
Gas: MW % of total
Coal: MW % of total
Hydro: MW % of total
RES: MW % of total
IPP: MW % of total
Transmission
System Operator
Distribution
System Operator
Balancing Market
Ancillary Services Market
• Retail tariffs are set to fully recover costs associated with generation, transmission and distribution services.
Generators Transmission
Distribution & Retail
Supply
Market OperatorServices to be
added
Consumer
Weighted Average
Generation TariffsTransmission Tariffs Distribution Tariffs Retail Tariffs
5
GAP ANALYSIS: ESTIMATING FULL COST RECOVERY
RETAIL TARIFFS
Generation
Model
• Develop financial model for each country to determine full cost recovery tariffs for generation: gas, coal, hydro, RES
• Using energy mix, calculate the weighted average wholesale tariff for generation
Transmission
Model
• Develop financial model to determine full cost recovery tariffs for transmission system
• Develop pricing methodology for wheeling charges
Distribution
Model
• Develop financial model for each country/utility to determine full cost recovery tariffs for distribution system
Retail Tariff
• Determine the retail tariffs for each country using the three tariff components
• Retail Tariff = Generation Tariff + Transmission Tariff + Distribution Tariff
6
GENERATION TARIFFSA two-tier tariff structure for power sales is considered as standard
▪ A capacity charge
➢ Covers the facility’s Fixed costs
➢ Debt service payments
➢ Return on invested capital
➢ Fixed operations and major maintenance costs
➢ If IPP, it is likely to constitute a “Take or Pay” obligation
▪ Variable energy charge
➢ Covers day-to-day operational costs
➢ Fuel cost
➢ Other supplies and routine maintenance
▪ To set proper tariff level need to:
➢ Understand the project costs
➢ Operating (fixed, variable)
➢ Financing (debt, equity)7
STANDARD PPA TARIFF STRUCTURE
Overall Tariff
Capacity Price Energy Price
Debt
Service
Recovery
Return on
Equity
Fixed
O&M
Expenses
Variable O&M
Expenses
Fuel
Costs
Foreign Local Foreign Local
Covers the facility’s fixed costs, including
debt service payments, return on invested
capital, and fixed operations and
maintenance costs
Covers day-to-day operational costs,
fuel cost and other supplies and
maintenance
8
The transmission function facilitates competitive electricity markets by impartially providing
energy transportation services to all energy buyers and sellers, while fairly recovering the cost
of providing these services.
In addition to meeting revenue requirements, transmission pricing should ideally address the
following:
✓ Promote economic efficiency
✓ Encourage investment and determine location of generation
✓ Compensate transmission service providers
✓ Allocate transmission costs reasonably among native load and third party
✓ Maintain reliability of the transmission grid
TRANSMISSION PRICING CONCEPTS
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▪ Typically, utilities are required by the regulator to offer both point-to-point
and network transmission service.
▪ Point-to-point service has specified points of delivery and receipt,
transmission direction, and quantities. Can be used to transmit and sell
power to third party (wheeling).
▪ Network service typically is negotiated through a long-term contract and
involves flexible delivery points and quantities. Network service is arranged
to meet a wholesale customer's varying native load requirements.
TRANSMISSION PRICING CONCEPTS (cont’d)
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Systems With Centralized
Dispatch
Systems With
Decentralized Dispatch
Existing System Cost
Other Uplift Costs
This approach is suitable for
centralized markets, such as US.
Fixed and variable costs are
recovered simultaneously. Fixed
costs are allocated to all nodes
by tracing the upstream
generators and/or downstream
loads. Variable costs are allocated
to all nodes via locational
marginal pricing (LMP).
This approach is suitable for
decentralized markets, such as
Europe or India. Fixed costs are
calculated independently for
each system. Congestion and
loss costs are calculated
separately. Point of connection
tariff is the preferred method
for decentralized markets.
Existing System Cost
Cost of Losses
Cost of Congestion
Other Uplift Costs
TRANSMISSION PRICING CONCEPTS (cont’d)
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Transmission Pricing
Methods
Embedded Transmission
Pricing
Incremental
Transmission Pricing
Composite
Embedded/Incremental
• Postage Stamp
• Contract Path
• Distance Based
• Power Flow Based
In the embedded
transmission pricing method,
all costs are summed up into
a single number. These costs
are then allocated to system
users based on the extent of
use.
In the incremental
transmission pricing
method, the customer pays
for associated incremental
costs: i.e. the full cost for
any new facilities that the
transaction requires.
Existing system costs are
still covered by the present
(old) customers.
The composite pricing
method includes the
combination of existing
system costs and the
incremental costs of
transmission transaction.
TRANSMISSION PRICING CONCEPTS
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TRANSMISSION PRICING CONCEPTS
Embedded Transmission Pricing
Postage Stamp
Postage stamp: This method is the most common and simple method used by utilities.
Postage stamp rates are based on average system costs and may have a variety of rate
designs, based on energy charges (cents per kWh), demand charges (cents per kW), or both
energy and demand charges. Rates may include separate charges for peak and off-peak
periods, may vary by season, and, in some cases, set different charges for weekday versus
weekend and holiday usage. This method doesn’t require power flow calculations and is
independent of the transmission distance and network configuration.
Contract Path Distance Based Power Flow Based
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TRANSMISSION PRICING CONCEPTS
Contract Path: Traditional point-to-point transmission pricing is based on a routing scheme
known as a "contract path“, which is selected by the utility and the wheeling customer
without power flow study. All or part of the transmission cost related to the specified path are
then assigned to the transaction. The grid operator has to know all concluded bilateral
contacts to determine the extend of usage of the single transaction.
Distance Based: This method allocates the transmission charges based on the magnitude of
transacted power and the geographical distance between the delivery point and the receipt
points. Compared to the postage stamp method, the distance based concept takes the
distance between injection and consumption into account.
Power Flow Based rate of transmission is calculated using the real network conditions using
power flow analysis, forecasted loads and the generation configuration. The cost allocated to
the customer is calculated on the basis of extent of use of each network facility.
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TRANSMISSION TARIFFS: POSTAGE STAMP
Postage Stamp Tariffs
Existing System Costs Variable Costs
Losses
Transmission
Costs
Operations
Maintenance
Capital Investments
Other
Rt = TC * (P t/P peak)
Rt -transmission price for transaction t
TC – total transmission charges
Pt – transaction load
Ppeak – system peak load
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TRANSMISSION TARIFFS: DISTANCE BASED
Distance Based Tariffs
Transmission charges are assigned to the customer based on the distance
(km) between injection and receipt and the magnitude of transmitted
power (MW).
TCt – cost allocated to transaction t
TC – total cost of all lines in US$
Lk - length of line k in km
Ck - cost per MW per unit length of line k
MWt,k – is the flow in line k due to transaction t
T – is the set of transactions
K – is the set of lines
∑t-T ∑k-K CKLK MWt,k
∑ CKLK MWt,kTCt= TC *
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DISTRIBUTION TARIFFS
▪ Distribution services are broadly divided in three
categories:
• Customer connection service: connect and
integrate individual customers or customer
groups
• Customer service: metering, billing, and
communications
• Wires services: includes power
transportation, mainly capital costs.
▪ The utility will typically calculate the revenue requirement for the coming year and adjust the
tariffs accordingly
▪ Customers are often grouped for pricing purposes
• Residential
• Commercial
• Industrial
• Lighting
• Irrigation
• Other
Distribution tariffs
System Costs Variable Costs
LossesOperations
Maintenance
CapEx
Other
Revenue Requirement
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DISTRIBUTION TARIFFS
• It is common for regulator to require that utilities disclose the pricing
methodology
• The methodology should demonstrate:
➢ well defined and clearly explained prices
➢ the rationale for consumer groupings
➢ the method for determining the allocation of consumers to the consumer
groupings
➢ quantification of key components of costs and revenues
➢ the cost allocation methodology and the rationale for the allocation to
each consumer grouping
➢ the calculation of the tariffs to be charged to each consumer group
➢ the rationale for the tariff design
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• Data provided by each country team
• Data from CAREM engineering team
• Data from CAREM Financial team
• Use the data to develop modeling assumptions
DATA GATHERING
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DATA GATHERING (cont’d)
Electricity sector structure:
• List of all major companies in generation, transmission and distribution
• Consumer categories, including relevant data, if available
• Graph showing sector schematic
• Description/report on tariff legislation and regulation, if available
• Info on imports: total volume, tariffs paid, etc. for the last 3 years
For each component of the energy sector, if available (generation,
transmission, distribution):
• Annual report for the last 3 years
• Financial statements (if not in the annual report) for the last 3 years
• Future investment plans
• Any forecasting model used for management of operations
• How the tariffs are determined / Historical tariffs
• Operating costs, by category (labor/wages, fuel, G&A, other)
• Recurring and non-recurring capex
• Loan agreements for each debt facility
• Corporate tax data applicable to the sector 20
PRELIMINARY ASSESSMENT
• Hold working meetings with representatives of each country
• Discuss country specific issues
• Identify data gaps and develop solution on how to bridge them
• Develop mutually acceptable solution if the required data is absent
• Tailor the data and methodology for financial analysis to country needs
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FINANCIAL MODELS
Develop customized comprehensive financial models for each
country
• Focus of analysis will be calculation of fully-cost recovery tariffs
• An iterative process, where each utility will be consulted on each model
iteration
• The goal will be determining the gap that needs to be eliminated to
achieve full cost recovery
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POWER SECTOR FINANCIAL SUSTAINABILITY
Power sector Financial Sustainability Analysis and Recommendations
• Cash flow analysis - improving cash availability➢ collections
➢ system losses
➢ tariff structure
• Capital structure & financing analysis➢ long-term investments
➢ capital sources
➢ enabling access to capital markets
➢ debt capacity analysis
• Financial management➢ treasury functions
➢ asset-liability matching
➢ currency hedging, if necessary
23
CAPACITY BUILDING
• Financial modeling
• Project finance
• Financial planning
• Forward-looking financial statement analysis
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FORWARD FINANCIAL ANALYSIS
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FINANCIAL STATEMENTS: BALANCE SHEET
• Balance Sheet = What you have is equal to what you own plus what
you owe
• Asset = Liabilities + Net Worth
• Snapshot at a point in time
ASSETS
Current Assets
Cash
Accounts Receivable
Inventory
Non-Current Assets
Fixed Assets (depreciated capex)
Other Capitalized Costs
LIABILITIES
Current Liabilities
Accounts Payable
Current Portion of Long Term Debt
Non-Current Liabilities
Long-Term Debt
EQUITY/ NET WORTH
Paid-in Capital
Retained Earnings
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FINANCIAL STATEMENTS REFRESHER: INCOME
STATEMENT
• Income Statement also known as Profit and
Loss Statement
• Profit on paper does not really inform you
if you are generating cash
• It is measured over a period of time
INCOME STATEMENT
(+) Revenues(-) Opex
EBITDA(-) Depreciation and Amortization
EBIT(-) Interest Expenses
EBT(-) Taxes
Net Income
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FINANCIAL STATEMENTS REFRESHER: CASH FLOW
STATEMENT
• Cash Flow Statement measures the actual
cash inflows and cash outflow calculating the
end cash position
• It is measured over the same period of time
as the Income Statement
CASH FLOW STATEMENTNet Income
(+) Depreciation
(+/-) Changes in Working Capital
Cash from Operating Activities
(-) Addition to Fixed Assets
(-) Addition to other Capitalized costs
Cash from Investment Activities
(+) Debt Proceeds
(+) Equity Proceeds
(-) Principal Repayment
(-) Dividends
Cash from Financing Activities
Cash Generated During the Period
(+) Beginning Cash
End Cash
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METHODS FOR DETERMINING UTILITY’S DEBT
CAPACITY
• No single, broadly accepted methodology for determining debt capacity
• Generally three approaches are used for debt capacity calculation
➢ based on maintaining the targeted credit rating
➢ based on asset’s market value
➢ based on free cash flow assessment
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METHODS FOR DETERMINING UTILITY’S DEBT
CAPACITY
• Set debt levels to achieve and/or maintain target credit ratings
• Determine the target credit rating of the company
• Ascertain the metrics used by debt rating agencies to assign
ratings to the utility companies (interest coverage ratio, long term
debt to asset ratio, debt service ratio, etc.)
• Build pro-forma financial statements, flexible enough to very the
debt levels to determine how the ratios change and ultimately
impute the ratings of the company
Once the maximum debt capacity is determined, a stress test of the
projected capital structure is necessary to make sure there is always
sufficient cash available for any foreseeable long term strategic needs.
I. Debt Capacity using Targeted credit rating
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METHODS FOR DETERMINING DEBT
CAPACITY
• Subtract the current liabilities on the balance sheet from the
current assets after an impairment test of those assets has been
completed
• This method requires analysis of the market value of the assets and
marking the value of those assets on the books to the market value
• Then a simple subtraction calculation of the sum of assets minus the
sum of liabilities informs regarding the additional debt capacity that
the company can afford
II. Debt Capacity using Asset’s Market Value
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METHODS FOR DETERMINING DEBT CAPACITY
• Analyze financial statements for the last 3-5 years
• Review projections (20 to 30 years) of key value drivers, such
as, electricity tariffs and growth in sales and the cost of fuel
used in generation, to determine the company’s growth
prospects
• Analyze historic statements compared with those of other
electric utilities across Central Asia (if available).
• Use this analysis to determine utility’s operating margins and
establish performance metrics applicable to the utility going
forward
III. Debt Capacity Using Free Cash Flow Analysis
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METHODS FOR DETERMINING DEBT CAPACITY
• Estimate the values of capex, and cash flows available for debt service
(CFADS) associated with the construction and management of the
future power plants and import these into corporate financial model
• Approximate the debt amortization schedules of existing and planned
facilities to assess their impact on the overall debt capacity of the
utility
• Use the targeted d/e ratios as a constraint when sizing the facility and
calculating the borrowing capacity
III. Debt Capacity Using Free Cash Flow Analysis
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CHARACTERISTICS OF SUSTAINABLE UTILITY
▪ Solid financial health
▪ Technological and economic viability
▪ Predictable cash flows
▪ Full cost recovery tariffs
▪ Viable long term investment strategy
▪ Satisfactory risk allocation and mitigation
▪ Dependable contract dispute resolution procedures
▪ Credible and creditworthy counterparties
▪ Superior management abilities and experience
▪ Stable legal and regulatory framework
34
STAND ALONE PROJECT RISKS & CONTRACTUAL
MITIGANTS
Description Contractual Mitigants
Credit risk Sovereign ceiling, Access to credit at
competitive rates.
Offshore reserve accounts, late
payment penalties.
Construction
and
Completion
Delays, cost overruns, performance
issues. Rising EPC costs leading to rising
break-even output prices.
Greater costs in difficult or remote
regions.
Sponsor completion guarantees
on equal basis, turnkey EPC
contracts, performance LDs.
Supply/ Reserve Inadequate reserves, deterioration of
quality.
Conservative estimates of P1
reserves plus ‘tail’.
Legal Change of laws/regulations that
adversely affects cash flows.
Taxation, local content, profit
repatriation, property rights, intellectual
property, labor, dispute resolution, etc.
Dispute resolution mechanisms,
enforcement through expedited
international arbitration.
35
STAND ALONE PROJECT RISKS & CONTRACTUAL
MITIGANTS
Description Contractual Mitigants
Political Expropriation, currency
inconvertibility & transfer, political
violence.
PRI.
Financing Exchange rates, inflation, interest
rate.
Hedges, offshore accounts,
indexation.
Operational
and technology
risks
Performance issues, scope creep. Performance guarantees, sole
operator or clear allocation of
responsibilities.
Force majeure Non-preventable risks such as
natural events, general strikes, etc.
Insurance requirements.
Revenue Prices, quantities. Long-term offtake agreements with
indexed pricing.
36
CAPITAL MARKET FINANCING REQUIREMENTS
- Committed government support
- Host government coordination
- Predictable regulatory
environment
- Credible protection for foreign
investment
- Established lender rights
- Enforceable contracts
- Government guarantees against
risk
-Creditworthy participants
-Financial information
-Secured long term contracts
-Economic viability
-Technical viability
-Proper allocation of risks
Country Level Corporate Level
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SOURCES OF DEBT
Sponsor Senior Debt
Mezzanine
Public
Strategic Islamic Financing
Bank Debt
ECAs
Bonds
CorporateUnsecured
CorporateSecured
ProjectFinanced
EXIM
SACE/Other EU
JBIC
European
US
PrivateEquity
38
SOURCES OF FINANCE (1/3)
Characteristics Advantages Disadvantages
Equity Power producer,
Developer, OEM,
Construction, Trading,
Energy and Utility
companies, Private
Equity.
Greater management
flexibility, freedom from
covenants.
Greater risk exposure, large
investments in single project might
affect credit rating.
Commercial
Bank Debt
Amount and type of
finance (senior loan,
subordinated debt)
depends on the
bank’s evaluation of
the project’s risk
profile.
More flexible terms
than other types of
financing.
Country and project exposure
limits restrict size.
Shorter maturities and higher
rates than other types of financing.
Variable interest rates.
Capital
Markets
Bond financing on
capital markets,
where availability and
terms are tied to
project credit rating.
Long tenors, fixed
interest rates, large size,
few covenants.
Host country sovereign
rating does not
necessarily act as ceiling.
Not generally available for
greenfield projects.
Must achieve investment grade
rating.
Raised as lump sum, creating
negative carry.39
SOURCES OF FINANCE (2/3)
Characteristics Advantages Disadvantages
Islamic Finance Becoming increasingly
common in the Middle
East, North Africa, and
South Asia.
Financier takes risk
beyond just provision
of capital.
Can allow investors to tap
into local lending markets.
Increases lender security
due to asset-backed nature
of transaction.
May improve project image
in Islamic countries.
Compliance with Shariah law
requires special financing
structures and shariah panels
whose policies are not fully
standardized.
Can result in longer
structuring periods and
higher structuring costs.
Export Credit
Agency
May provide
guarantees, insurance,
and direct loans. Eg.
US EXIM, JBIC,
Coface, SACE, etc
Loans can add capacity,
offer longer tenor, lower
rates (often fixed) than
commercial banks.
Can offer some protection
against sovereign risk,
thereby attracting
commercial lenders.
Relatively high premiums.
Typically tied to export of
equipment or goods
manufactured in the ECA’s
home country.
Country restrictions.
Lengthy approval process.
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SOURCES OF FINANCE (3/3)
Characteristics Advantages Disadvantages
Multilateral
Agency
Offer direct loans or
act as lender of
record for
commercial banks.
Eg. World Bank,
African
Development Bank
May provide protection
against sovereign risk in
form of insurance or ‘halo’
effect. Can attract
commercial capital.
Preferred Creditor status.
Country restrictions.
Lengthy approval process,
with environmental & social
requirements.
Extensive reporting
requirements.
Private
Equity,
Mezzanine
Debt, other
alternative
sources
Direct equity
investments or debt
with equity return
characteristics.
Subordinate to
regular bank debt.
Growing source of capital,
particularly in emerging
markets and infrastructure.
Expectations of high
returns within relatively
short time spans.
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WAYS TO ENHANCE CREDIT OF FUTURE STAND
ALONE INVESTMENTS
• Line of Credit
– During construction or during operations.
– Debt service line of credit.
• Reserve Account
– Operating account. and management reserve account.
– Debt service reserve
• Contingent Equity Account
– During construction.
• Performance Guarantees - host government
• Insurance
– Commercial
– Political42
WORLD BANK/PRG GUARANTEES (1/3)
• World Bank
• Partial risk guarantees (PRG)
– Cover commercial lenders for a private sector project against default
arising from a government-owned entity failing to perform its
contractual obligations.
– Risks eligible for coverage
➢changes in law
➢expropriation
➢nationalization
➢currency transfer and convertibility
➢nonpayment of a termination amount
➢ failure to issue licenses in a timely manner
➢PRGs require a government counter-guarantee43
WORLD BANK GUARANTEES (2/3)
• Multilateral Investment Guarantee Agency (MIGA)
– Provides political risk insurance (PRI) coverage to foreign direct investors
– Risks eligible for coverage
➢ transfer restriction
➢expropriation
➢war and civil disturbance
➢breach of contract
44
OPIC/US DFC GUARANTEES
• OPIC provides loan guarantees, which are typically used for larger projects
• Generally requires US equity ownership of at least 25 percent of the equity of
a project (subject to change).
• OPIC insurance can cover the following three political risks:
– currency inconvertibility
– expropriation
– political violence
45
FORWARD FINANCIAL AND ANALYSIS
46
PROJECT FINANCE VS. CORPORATE MODELS
CORPORATE MODELS
Multiple lines of business with various types of risk
Financial ratio criteria based on industry type.
Often use a financial modeling package rather than a spreadsheet to present
history and alternative financing methods
Use short-term debt/temporary securities as a plug.
Data is obtained from annual reports and published reports of capital expenditures.
Public data on historical trends.
PROJECT FINANCE MODELS
Single asset with identifiable revenue, cost, and technological risks.
Financial ratio criteria depend on contract structure and technology.
Generally use a spreadsheet model.
Pay cash flow over maturities as dividends.
Specific financial projections and technical data from project sponsors.
Little public data; often no history.
47
CONSIDERATIONS WHEN MODELING
• How Much Detail
– How important is additional detail?
– Is there enough information to warrant complexity?
– What information is conveyed by detail?
– Tradeoff with time to complete.
– Context of Objectives.
• Model Flexibility
– Changing assumptions.
– Future Updates.
– Using base model for other projects.
– Changing construction period.
– Changing terms of loan.
48
FINANCIAL MODEL STRUCTURE▪ Achieving optimal financial structure requires development of a financial model that
accurately simulates the project’s cashflows given its technical, contractual, and market
characteristics.
▪ Key elements for successful modeling:
➢ Clear and flexible setup
➢ Easy to follow logic
➢ Modular approach
All calculated data:
Timing
Capex
Spending Curve
Funding
Revenue
Expenses
Operations
Debt Amortization
Tax
Depreciation
Waterfall
Input WorksheetIntermediate
Worksheets Output worksheet
Recalled data:
Summary
Cash Analysis
Debt Analysis
Return Analysis
Financial Statements Ratios
Group the assumptions by
categories:
Timing
Financing
Capital expenditures
Operating
Working capital
Depreciation
Tax
Major maintenance
49
TYPICAL MODEL DATA FLOW
Key Outputs &
Sensitivities
Summary
Financials
Financial
StatementsError Checks
Scenario Manager
/ Time Constant
Inputs
Time Variable
Inputs
Operations &
Sales
Tax Calculations
Ratio & Return
Calculations
Debt Calculation
Accounting
Calculations
Time & Inflation Development
Funding
Reserve AccountsWaterfall
Calculations
Graph Data
50
Construction
▪ EPC Cost
▪ EPC Drawdown Schedule
▪ Timing
▪ Development Costs
▪ Contingency
PROJECT KEY INPUTS (1/6)
51
Operations
– Scheduled Outage Rate
– MW Capacity
– Heat Rat
– Dispatch Factor
– Number of Starts
– Ramping
– Frequency of Major Maintenance
PROJECT KEY INPUTS (2/6)
52
Cost Data
– Utility costs (water, auxiliary power)
– Labor
– Insurance
– Land lease
– G & A
– Chemicals
– Routine maintenance costs
PROJECT KEY INPUTS (3/6)
53
Financial
– Loan Term
– Base Interest Rate
– Interest Spread
– Commitment fees
– Exposure fees
– Arrangement fees
– Debt amortization schedule
PROJECT KEY INPUTS (4/6)
54
Contractual
– Electricity Tariff
– Fuel Price
– Fuel Transportation Costs
– Penalties
– Major Maintenance costs
– Operating fees
– Escalation rates
PROJECT KEY INPUTS (5/6)
55
Macroeconomic & General
– Inflation
– Exchange Rates
– Working Capital
– Depreciation Allocations
– Capital Expenditures
PROJECT KEY INPUTS (6/6)
56
POWER PLANT OPERATING CHARACTERISTICS
Power plants key parameters:
▪ Capacity (MW)
▪ Capacity Factor (CF)
➢Based on availability and dispatch factors
➢CF = AF X DF
▪ Availability Factor (AF)
▪ Percentage of the time a plant is operational
▪ Typical availabilities:
➢Coal 85-95%
➢Gas 90-95%
➢Hydro 20-70%
➢Nuclear 93%
▪ Dispatch Factor (DF)
➢Percentage of the time a plant is called by the grid operator
57
POWER PLANT OPERATING CHARACTERISTICS
Power plants key parameters:▪ Heat Rate
▪ Amount of heat energy required to produce a unit of electricity (btu/kwh)
▪ Fuel Expense calculation for a period:
➢ Electricity produced (KWh) = Net capacity * hours in operation per period
➢ Heat used (MMBTU)= heat rate * electricity produced
➢ Fuel expense (USD) = fuel cost per MMBTU * Heat used
▪ Higher efficiency demands less heat rate
➢ Steam turbines 8,000 to 10,000 btu/kwh
➢ Gas turbines 6,800 to 9,000 btu/kw
➢ Combined cycle gas turbines 5,500 to 6,500 btu/kwh
▪ Ramp Rate
➢ How quickly a plant is able to change its output from min to max load
▪ Cycling
➢ Ability to completely shut down and restart
➢ Gas fired power plants have good cycling ability
➢ Coal power plants usually base load (poor cycling ability)
58
SAMPLE FINANCIAL MODEL
59
ACTION ITEMS
60
NEXT STEPS
▪ Formation of working groups
▪ Points of Contact
▪ Roadmap & discussion of next steps
61
Pho
to: C
reat
ive C
om
mo
ns
CENTRAL ASIA ELECTRICITY MARKET
CHIEF OF PARTY ARMEN ARZUMANYAN
KUNAYEV STREET 77, OFFICE 520
ALMATY, KAZAKHSTAN, 050000
62